You would assume that starting a business in the UK and gaining investment would be relatively straight forward, especially considering it is 2019. But unfortunately, this is not always the case, especially for female entrepreneurs. Of the £5.6bn of Venture Capital invested within the UK in 2017, 89% went to all-male founder teams. This means that for every £1 of VC investment, all female start-up founders received less than 1p, with mixed-gender teams receiving 10p.
These findings come from the recent UK VC & Female Founders report, commissioned by Chancellor Philip Hammond and carried out by the British Business Bank in partnership with Diversity VC and the BVCA and draws attention to the continual barriers faced by female-led firms when trying to access venture capital.
These shocking statistics are perhaps not surprising when you consider that women only make up 13% of senior stakeholders on UK VC investment teams whilst 48% of investment teams have no women at all. They highlight the huge barriers faced by women in business and as quoted by Liz Truss, Chief Secretary to The Treasury, ‘It is incredible that in 2019 men seem to have a virtual monopoly on venture capital. We need more investment going into start-up ventures and more women putting businesses forward. It’s in everyone’s interest that financing processes are open and meritocratic to grow the economy and make use of all the talent we have.’
There is of course a link between the types of businesses that tend to receive VC investment (Software, AI and Medical Technology) and their demographic, especially in the recent times. The report highlights that software attracts the most deals but females are underrepresented in the sector, and from our experience, even businesses do not support female lead software businesses when investing in an innovative piece of technology, because the same applies with seniority, with less females holding senior managerial roles in decision making process.
So it may be the case that less all-female founder firms find themselves eligible for VC investment. In a predominantly male playing field perhaps unconscious bias plays a role – are women seen as a ‘riskier bet’ by both businesses and investors, still? Networking also plays a huge role in successful investments, with the report finding that ‘warm introductions’, where a business/founder is recommended to a VC, being 13 times more likely to be funded than cold submissions. All-female teams were less likely to have a warm introduction, potentially affecting their chances of investment, another barrier that needs to be overcome.
Whilst we all appreciate warm introductions, women teams and sole female founders have a lot more on their plate, especially when tackling the above mentioned biases and unequal playing field so it is not surprising that they receive equally lower introductions & when they do of course the fact that they are not in the typical format of founding team quickly works against them. Unfortunately, the issue does not stop there, even when businesses are given initial seed funding, the figures show that a smaller percentage of businesses with at least one female founder received a second round of funding compared to all-male founders.
However, females may work in industries that require less funding or may exit earlier. In our experience, they exit earlier due to the constant battle of sexes and lower valuations compared to male founded teams. Often our perceptions and unconscious biases overlook the logic of why an investee may be ideal in a hard to break space if they don’t look, talk and belong to familiar backgrounds and experiences. We also find that many female founders are experienced, unlike many male founders and is a recorded fact that they manage the funds a lot better than all male teams, yet is that fact alone enough to persuade investors to diversify?
As a sole female founder in a B2B enterprise space I am focused on a segment where innovation is just a word, so not only do I find myself educating businesses but now my new found love for equality, diversity and inclusion both in tech and in people means that I cannot unsee and unhear the experiences and stories of women who struggle despite the best ideas and even better execution due to simply their sex, age and background. I hear a lot of good is being spoken about and many women to women organisations are helping but candidly as a female founder who doesn’t shy away from networking and asking for help let me tell you even those institutions are not fair and not for all.
In Lisbon Web Summit a couple years ago I heard a very notable San Francisco based investor in a key panel say and I quote “I know for a fact that if you are not from Harvard or Stanford, even a drop out from those that you are not going to be bright enough to have a successful startup”. Most of you who know me, know my reaction to this would have been hilarious. We need real action, not just conversations and soon before we see more amazing female founded startups in tough sectors and segments disappear due to lack of support and funding. And if it takes a quota to make things equal, maybe there should be a temporary quota in corporations and in funding institutions until things are equal for all.
This report, which acts as a fantastic first step in not only highlighting these discrepancies and the reasons behind them, but by putting this subject to the forefront of people’s minds and hopefully ensuring that everyone, including the government, work together to break down these barriers and ensure this huge pool of talent, which would be enormously beneficial to the economy, is not overlooked. We do have a long way to go and although it is noted that venture capital investment in female founder start-ups is increasing, it is not happening quickly enough. At the current pace, it will take more than 25 years for all-female teams to reach even 10% of all deals.